Kake Kafe is the producer of scrumptious coffee cakes. The entity produces 1,000 coffee cakes per...

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Kake Kafe is the producer of scrumptious coffee cakes. The entity produces 1,000 coffee cakes per month and supplies them to their other stores island wide. The coffee that is used as raw material is purchased at Blue Mountain Coffee Company at a cost of $500 per lb. The entity uses 1,350 lbs. of coffee per month. The storage cost is estimated to be 18% of the cost per lb. and the order cost is $250 per order. Blue Mountain Coffee Company has offered to provide the following discounts: 3% for orders of 500 - 799 lbs. 7% for orders of 800-999 lbs. 10% for orders of 1000 and above. Required: (a) Calculate the Economic Order Quantity. (b) Calculate the total cost based on the Economic Order Quantity. (3 marks) (4 marks) (c) Calculate the total cost for each individual alternate order quantities. (12 marks) (d) Which order quantity is considered the optimal order quantity and why? (2 marks) (e) While the EOQ model can be useful for determining optimal order size, the assumptions may not be realistic. List four of these assumptions. (4 marks) Kake Kafe is the producer of scrumptious coffee cakes. The entity produces 1,000 coffee cakes per month and supplies them to their other stores island wide. The coffee that is used as raw material is purchased at Blue Mountain Coffee Company at a cost of $500 per lb. The entity uses 1,350 lbs. of coffee per month. The storage cost is estimated to be 18% of the cost per lb. and the order cost is $250 per order. Blue Mountain Coffee Company has offered to provide the following discounts: 3% for orders of 500 - 799 lbs. 7% for orders of 800-999 lbs. 10% for orders of 1000 and above. Required: (a) Calculate the Economic Order Quantity. (b) Calculate the total cost based on the Economic Order Quantity. (3 marks) (4 marks) (c) Calculate the total cost for each individual alternate order quantities. (12 marks) (d) Which order quantity is considered the optimal order quantity and why? (2 marks) (e) While the EOQ model can be useful for determining optimal order size, the assumptions may not be realistic. List four of these assumptions. (4 marks)

Answer rating: 100% (QA)

a Calculate the Economic Order Quantity EOQ To calculate the EOQ we need to use the formula EOQ 2 Demand per month Cost per unit Order cost per unit D... View the full answer